One of Europe's largest banks, BNP Paribas and its many subsidiaries specialize in retail banking, corporate and investment banking, and investment services across more than 75 countries mostly in Europe, but also in North America, Africa, and Asia. BNP Paribas operates in Italy through BNL banca commerciale. The French banking giant also owns Belgium's BNP Paribas Fortis, which operates more than 1,000 branches in Europe and the US. In the western US the company owns BancWest (the parent of Bank of the West and First Hawaiian Bank). BNP Paribas earns over 75% of its revenue from customers in Europe (mainly in Belgium, France, Italy, and Luxembourg).
BNP Paribas operates three core businesses: Retail Banking, Investment Solutions (IS), and Corporate and Investment Banking (CIB). Retail banking operates more than 7,000 branches in 49 countries and accounted for more than 60% of the bank's total revenue in 2014. The segment consists of its domestic retail banking operations in France, Italy (BNL banca commerciale), Belgium, and Luxembourg (BNP Paribas Fortis and BGL BNP Paribas), and its international retail banking operations which are outside the euro zone, including the Europe Mediterranean and the US (including BancWest). The segment also operates the Personal Finance unit through BNP Paribas Personal Finance (PF), which is a consumer credit specialist and also holds a residential mortgage lending business (which it's winding down).
The Corporate and Investment Banking segment (22% of revenue) includes its Advisory & Capital Markets (equities and equity derivatives, fixed income and forex, and corporate finance) and Corporate Banking (lending specialty financing, as well as cash management and international trade services across Europe, Asia, Americas, Middle East Africa) businesses.
BNP Paribas' Investment Solutions segment (17% of revenue) provides wealth management, asset management, securities services, insurance, and real estate services. Some of its subsidiaries include BNP Paribas Securities, BNP Paribas Wealth Management, and insurance firms BNP Paribas Cardif and Pinnacle Insurance (Cardif Pinnacle). Other holdings include private bank BNP Paribas Banque Privée, consumer lender Cetelem, online brokerage Consorsbank (formerly Cortal Consors), and BNP Paribas Asset Management.
Broadly speaking, about 51% of the bank's net operating income came from interest income (mostly from loans) in 2014. Another 19% came from commission income. The rest of its net operating income came from non-recurring sources such as net gains on financial instruments, available for sale financial assets, and other activities.
While it caters to more than 75 countries, the Paris-based bank focuses mainly on four domestic markets: Belgium, France, Italy and Luxembourg. Europe is the bank's largest market, accounting for more than 75% of revenue in 2014. North America contributed about 10%, while the Asia-Pacific and Africa region and other countries each contributed more than 5%.
Note: Growth rates may differ after conversion to US dollars. This analysis uses financials from the company's annual report.
BNP Paribas has struggled to grow its revenue and profits over the past several years as the European economy has faced headwinds toward consistent growth.
The bank's revenues (net of operating expenses) rose 2% to €39.2 billion ($47.6 billion) in 2014 thanks mostly to a 4% increase in net interest income as loan business grew 7% during the year. An 8% rise in commission income and a 21% jump in net gains on available-for-sale financial assets and other financial assets not measured at fair value also helped buoy the bank's top-line growth. All of the segments grew, with Retail Banking growing by 2% (driving most of the firm's overall growth), Investment solutions up 3.7%, and Corporate and Investment Banking up 2.1%.
Despite revenue growth in 2014, BNP Paribas' net income plummeted 97% to €157 million ($190.8 million) mostly due to a €6 billion ($7.3 billion) settlement charge with US authorities related "to violations of certain US laws and regulations regarding economic sanctions against certain countries and related recordkeeping," according to BNP. The group's operating cash levels nearly doubled to €16.5 billion ($20 billion) in 2014, mostly thanks to a net increase in cash related to transactions with credit institutions.
While retail banking has remained relatively strong, BNP Paribas has seen declines in its corporate and investment banking unit due to poor market conditions and losses on sales of sovereign bond debt. As a result the bank is engaged in ongoing cost cutting and the implementation of 2014-2016 business development plan. The plan includes three fundamental programs: Simple & Efficient, a reorganization and efficiency program now under way; the Asia Pacific plan intended to increase revenues at Corporate and Investment Banking and Investment Solutions; and Hello bank!, aimed at developing the digital bank.
Using its Simple & Efficient plan (which began in 2013) as a blueprint, BNP Paribas has taken a number of cost-cutting and growth initiative measures in recent years to boost profits amidst an increasingly regulated industry. Indeed, by late 2015, BNP reported that its transformation costs (investments in efficiency improvements) of around €620 million had led to savings of more than €2.514 billion per year in costs, about 84% of what it aimed to save annually by the end of 2016 (and beyond).
Since launching Hello bank! in 2013 and acquiring DAB Bank through its Consorbank subsidiary in late 2014, BNP Paribas has been moving toward digital banking channels that are quickly taking the industry by storm, allowing the bank to slow expensive branch-expansion plans and cut operating costs significantly while giving customers faster access to banking services. In late 2015 in the German market for example, the bank noted that between DAB Bank and Consorbank, BNP Paribas was the country's 3rd-largest digital bank, with some 1.5 million customers, as well as the largest online broker in the country.
Mergers and Acquisitions
In November 2013, BNP acquired Belgium's 25% share in its local consumer-banking unit, BNP Paribas Fortis, for 3.25 billion euros ($4.37 billion), as the country works to cut public debt. It also acquired Poland's Bank BGZ from Rabobank Group in 2013.